SRIMAD VIRAT POTTULURI VEERA BRAHMENDRA SWAMULA VARI MATTAM,CUDDAPAH vs. ITO., EXEMPTION WARD, TIRUPATHI

1. Page 3 of 12 & 2287/Hyd/2025 Srimad Virat Pottuluri Veera Brahmendra Swamula Vari Mattam Ltd, AIR 1962 (SC) 361 and the judgment of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Ram Mohan Kabra, 178 CTR 274.

We have carefully considered the rival submissions and perused the material placed on record including the case laws relied upon. It is a settled legal position that while the expression “sufficient cause” appearing in section 253(5) of the Income Tax Act, 1961 (“the Act”) is to be construed liberally, such liberal approach cannot be extended to cases where the delay is the result of inaction, negligence, or lack of bona fides on the part of the litigant. In the present case, the explanation furnished by the assessee does not inspire confidence. The demise of the founder of the Trust on 08.05.2021 cannot, by itself, justify the delay in filing the appeal against the order of the Ld. CIT(A) dated 21.08.2023. The assessee has only relied on the copy of the affidavit and has failed to place any cogent material on record to demonstrate that the Trust was completely incapacitated from pursuing its legal remedies during the relevant period. Even assuming that there were internal disputes and that the Endowment Authority had taken over the management, no satisfactory explanation has been offered as to why the appeal could not be filed for nearly two years after the appellate order. The affidavit filed is vague and does not explain the delay on a day-to-day basis, which is a well-recognized requirement in cases of inordinate delay. In this regard we have gone through para no. 15 of the order of Hon’ble Supremer Court in the case of Basawaraj & Anr. v. Special Land Acquisition Officer (2013) 14 SCC 81, which is to the following effect:

On perusal of above, it is evident that the Hon’ble Supreme Court has categorically held that “sufficient cause” means a cause beyond the control of the party, and where delay is attributable to negligence or inaction, condonation cannot be granted as a matter of right. Further, the Hon’ble Supreme Court in the case of P.K. Ramachandran v. State of Kerala (1997) 7 SCC 556 has held that law of limitation has to be applied with all its rigour, and courts have no power to extend the period of limitation on equitable grounds.

In view of the above judicial principles and considering the facts of the present case, we are of the considered opinion that the assessee has failed to demonstrate any reasonable or sufficient cause for the inordinate delay of 632 days in filing the appeal. The explanation furnished reflects negligence and lack of due diligence rather than circumstances beyond the control of the assessee. Accordingly, the petition seeking condonation of delay is rejected, and Page 5 of 12 & 2287/Hyd/2025 Srimad Virat Pottuluri Veera Brahmendra Swamula Vari Mattam consequently, the appeal filed by the assessee is dismissed as barred by limitation.

The brief facts of the case in the present appeal are that the assessee is a religious trust, which filed its return of income for the Assessment Year (“A.Y.”) 2016–17 on 16.10.2016, declaring Nil income. The case of the assessee was selected for scrutiny, and accordingly, notice under section 143(2) of the Act was issued by the Learned Assessing Officer (“Ld.AO") to the assessee on 06.07.2017. After considering the submissions made by the assessee, the Ld. AO completed the assessment under section 143(3) of the Act on 18.12.2018, determining the total income of the assessee at Rs.77,45,857/-. Against the said assessment, the Ld. AO initiated penalty proceedings under section 271(1)(c) of the Act. During the course of penalty proceedings, the assessee did not comply with the notices issued by the Ld. AO. Accordingly, the Ld. AO completed the penalty proceedings under section 271(1)(c) of the Act and passed a penalty order dated 22.03.2025, levying penalty of Rs.23,93,470/- on the assessee.

Aggrieved with the order of the Ld. CIT(A), the assessee is now in appeal before this Tribunal. We have heard the submissions of both the parties and perused the material available on record. On careful examination of the assessment order dated 18.12.2018, we find that no satisfaction whatsoever has been recorded by the Ld. AO regarding concealment of income or furnishing of inaccurate particulars of income, as required under section 271(1)(c) of the Act. We further observe that the Ld. AO has also not recorded any direction or deemed satisfaction in terms of section 271(1B) of the Act for initiation of penalty proceedings. The assessment order is completely silent on the issue of penalty initiation, except for a mechanical initiation of penalty proceedings without specifying the charge or recording satisfaction. It is a settled position of law that recording of satisfaction in the course of assessment proceedings is a sine qua non for valid initiation of penalty proceedings under section 271(1)(c) of the Act. In the absence of such satisfaction, the initiation itself becomes without jurisdiction and invalid in the eyes of law. In this regard, we have gone through para nos. 7 to 13 of the order of the Hon'ble Delhi High Court in the case of CIT Vs. Ram Commercial Enterprises Ltd., 246 ITR 568 which is to the following effect:

"7. The learned senior counsel for the assessee has submitted that the satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the Assessing Officer during the Page 7 of Srimad Virat Pottuluri Veera Brahmendra Swamula Vari Mattam course of any proceedings under the Act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub-section (1) of section 271 of the Act. Reliance has been placed on the Supreme Court decision in D.M. Manasvi v. CIT /1972] 86 ITR 557, wherein their Lordships have reiterated the view of the law taken in CIT v. S.V.Angidi Chettiar (1962) 44 ITR 739, 745, stated in the following terms : " The power to impose penalty under section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in clause (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty, is a condition for the exercise of the jurisdiction. " (p. 562).

The learned counsel also carried the court through the order of assessment dated 17-2-1988 to demonstrate that the requisite satisfaction is not to be found arrived at in the order of the assessment.

Having heard the learned counsels for the parties and having given our anxious consideration to the material available on the Page 8 of Srimad Virat Pottuluri Veera Brahmendra Swamula Vari Mattam record, in the light of the law laid down by their Lordships of the Supreme Court, we are of the opinion that no fault can be found with the judgment of the Tribunal and, therefore, the question suggested by the revenue does not arise as a question of law from the order of the Tribunal. The law is clear and explicit. Merely because this Court while hearing this application may be inclined to form an opinion that the material available on record could have enabled the initiation of penalty proceedings that cannot be a substitute for the requisite finding which should have been recorded by the assessing authority in the order of assessment but has not been so recorded.

A bare reading of the provisions of section 271 and the law laid down by the Supreme Court makes it clear that it is the assessing authority which has to form its own opinion and record its satisfaction before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority. Even at the risk of repetition we would like to state that the assessment order does not record the satisfaction as warranted by section 271 for initiating the penalty proceedings.

However, while placing strong reliance upon the expression in the course of any proceedings under the Act' in section 271(1) of the Act, the learned Counsel for the respondent sought to contend that the penalty proceedings being independent it is sufficient if the satisfaction is recorded in the order levying penalty. The learned Counsel in support of his submission cited a Full Bench decision of Allahabad High Court in CIT v. Gopal Krishna Singhania (1973) 89 ITR 27.

In the above decision, the Full Bench of Allahabad High Court was dealing with proceedings under section 34 of the Income-tax Act, 1922 which corresponds to sections 147 and 148 of the new Act of 1961 which provides for reassessment of income chargeable to tax which has escaped assessment. Having considered the scope and object of the said provisions, the Full Bench held that penalty under section 28(1)(c) of the old Act /corresponding to section 271(1)(c) of the new Act can be levied during the course of proceedings under section 34 in respect of a default committed during the original assessment proceedings.

The said decision is clearly distinguishable on facts and the ratio laid down therein is not applicable to the instant case.

It is also relevant to note that whether the assessee has concealed his income or has deliberately furnished inaccurate particulars thereof is essentially a finding of fact which has to be spelt out by way of recording the satisfaction of the Assessing Officer as required under section 271(1) of the Act. Therefore, in the absence of such a finding in the assessment order no penalty proceedings can be initiated."

In the result, the appeal of the assessee in is allowed.